Against Free Parking

Tyler’s latestNYT column describes the inefficiencies of “free” parking. I didn’t think I’d have much to say on it, because he’s just using standard microeconomics, and pretty obviously right. But then I saw two econobloggers disagree!

[Sometimes] we choose to allocate goods by other means than the price system, [such as] lotteries, waiting time, random draws, that sort of thing. It generally occurs when we think … everyone should have a relatively equal shot at consuming a good or service. For example, suppose we believe that everyone should at least have a chance to swim in the ocean. … Willingness to circle for a period of time looking for a parking place so you can go to the beach … has desirable allocative properties — and we can eliminate the externalities Tyler is worried about through a tax on carbon and congestion at the pump. The supply of parking … could be determined by the carrying capacity of the beach, which is itself influenced by considerations such as habitat protection that private markets may not handle well in any case.

I am not sure that the argument is correct. I worry that there is a lot of confusion between fixed costs and marginal costs. … If the price of parking went up, … maybe the total number of parking places would decline (it depends on elasticities), but … the number of unused parking places would go up. Is that necessarily welfare-improving? … Once I have decided to use land as a parking place (say, land in front of a store), then there is no reason for me to want to deter people from parking in empty spaces. That suggests charging a price of zero other than at peak times.

These seem to me to be weak status-quo-bias-driven attempts to evade simple microeconomic conclusions.

Re Mark Thoma, if we were concerned about overall equity of utility, we’d just give the poor more money and let them buy what beach trips they wanted. If we paternalistically thought poor folk irrationally buy too few beach trips (why?!), we might give them beach travel vouchers. But surely the vast majority of free parking is not well explained by our thinking the poor irrationally take too few car trips.

Re Arnold Kling, I didn’t see Tyler saying to force prices above marginal cost; he just opposed laws requiring excess supply. Why should we treat parking spots much different than thousands of other familiar products whose average costs are often above marginal costs? Should we require every mall to have enough movie theaters seats to handle the premier of a record blockbuster, all because since theatres are rarely full their marginal cost is near zero? How about similarly requiring a vast supply of restaurant tables which would then rarely be full?

Sometimes good economic analysis says that the world should be different than it is. Yes you should wonder if such an analysis is missing something important. But you shouldn’t strain too much just to justify the status quo. We require the creation of way too much parking, and we’d be better off to coordinate to stop it.

Added 5a: Arnold Kling responds, and Mark Thoma approves. Arnold again notes that when average costs are above marginal costs, free market prices may inefficiently deter usage. Arnold doesn’t at all address my question: “Why should we treat parking spots much different than thousands of other familiar products whose average costs are often above marginal costs?”

The main problem I have with is that the data are, in my case at least, simply wrong. The vast majority of times I park I’m at my house or apartment, where I own or rent the land, respectively, at relatives’ and friends’ where the same is true, or at malls, restaurants, shopping centers where the owners provide free parking in an attempt to attract customers. Expecting them to charge for parking is like expecting them to charge you to walk around in the mall breathing their air-conditioned air.

db

The major objection isn’t with owners who decide to provide “free” parking as part of the bundle of services they provide, but instead with building and land use regulations that mandate minimum parking amounts. All of the examples you cite, your friends’ home, malls, restaurants, etc. all likely were required to provide that parking by law. Those regulations are the problem, not whether or not the owner decides to charge for the spot. To the extent that these regulations do anything, they probably lower total welfare.

For a specific example of that, I once worked for a small business that was grandfathered in, but it could not move into a new building across the street because it didn’t provide enough parking; despite the fact that the particular business was mostly local walk-ins or people being dropped off by rides or cabs.

Even worse it was also despite the fact that there was a large, mostly less than half full public parking garage built by the town within easy walking distance – the business was “across-the-tracks” and therefore wasn’t allowed to count the tax-funded garage toward the requirement.

Actually, in high congestion areas, malls do in fact charge for parking. It’s true, for example, of the Pentagon City mall in Arlington, VA.

Kevin Dick

I also found Arnold’s attempts to armchair quarterback this rather puzzling. This is precisely the difficult optimization problem markets typically outperform individual decision makers on.

There are really only three possibilities for any given parking market:

– Less free parking is better, in which case eliminating these rules improves the situation

– More free parking is better, in which case eliminating these rules will also improve the situation IF the market is better at solving the problem than a few wise men.

– The local market is close to a proper equilibrium (I realize there may be multiple ones), in which case eliminating these rules will not have much of an effect.

So eliminating the rules weakly dominates keeping them.

Moreover, the fact that these solutions could vary at a much finer level of granularity than the regulations makes markets likely to be even better on average.

MichaelG

I can’t separate this from the widespread hatred of suburbs and cars among academics. If you were looking at problems with sensible allocation of resources, wouldn’t you first look at zoning or rent control? Compared to those regulations, parking has pretty minimal effects.

And the people who write these things never seem to understand that we suburban (and rural) types LOVE the mobility and convenience of cars. It’s a huge social benefit, much more important than the price of a bit of wasted land.

It’s not as if we’re running out of land anywhere except in crowded, dirty, crime-ridden, obsolete big cities (good riddance.)

Aguirre

Not that it should matter, but in the podcast accompanying the article Tyler Cowen talked about how he lives in the suburbs and very much likes the suburban way of life.

But yes, you are probably right to assume that much of the opposition to minimum parking rules is animated by a desire to elevate the status of non-drivers vis-a-vis drivers. Nevertheless, the economic arguments against parking minimums look solid to me and are widely accepted in other contexts. The fact that there may be other and greater inefficiencies in other zoning and land use policies isn’t an argument against fixing parking policy.

I can’t separate this from the widespread hatred of suburbs and cars among academics

Although as a denizen of academia myself, I can’t for the life of me understand how anyone who has ever been to a university could ever find themselves complaining about an excess of parking spaces.

Sean Brown

Minimum-parking requirements are encoded in “zoning.” This is why, say, Houston actually does have zoning though many claim otherwise…

blink

I wonder whether there is an analogy with trash collection. Some argue for subsidies on grounds that otherwise many people would simply litter which, given enforcement difficulties, would be much worse overall. Perhaps high parking costs would induce drivers to double park more often and bend other road rules. Still, the enforcement difficulties are much less than with litter, certainly insufficient to trump the straightforward economic analysis against free parking.

Ponder Stibbons

MichaelG,

Shoup argues in his book that parking does not have minimal effects. He gives a good shot at calculating the increased costs (which are hidden) it has, and they are huge. It’s not about ‘running out of land’. It’s about allocating land-use more efficiently. Among other things, parking requirements inflate land development costs, which are then passed on to all consumers in the form of higher prices.

Dan

@blink: Shoup argues that double parking occurs because there is insufficient supply to meet the demand for free or very cheap parking. Raising prices leads to less double parking.

Its very hard to gauge what is excess supply in parking, because parking demand is very fat-tailed and parking supply is very slow to react to market changes.

Where I live, anyone who charged for parking on a daily basis would quickly find themselves out of business, because land is cheap and the parking demand very fat-tailed. However, when the Cowboys are playing, everyone near the stadium charges for parking. Because of the fat-tailed nature of parking demand, efficient price is zero most of the time, and positive during intermittent periods of very high demand.

Kling’s argument makes sense if one were to consider parking to be a tragedy of the commons situation due to high costs of enforcing property rights. Enforcing property rights on parking lots does seem more costly than doing so for, say, restaurant or theater seating (it seems harder to tow a car than to get a person to move.)

But maybe it’s not much more costly… especially if violators have to pay all the towing costs, and parking lot owners can call to have an offending car removed at any time. Kling doesn’t present evidence to the contrary.